Applying the Concept Answers

Applying the Concept 4-1: Steps in Decision Making

Identify the step in the decision-making model represented by each statement.

Step 1: classifying and defining the problem or opportunity
Step 2: setting objectives and criteria
Step 3: generating creative and innovative alternatives
Step 4: analyzing alternatives and selecting the most feasible
Step 5: planning and implementing the decision
Step 6: controlling the decision

1. “That is a good idea, Raj, but how are you going to put it into action?”
Step 5. Plan the decision.  Putting the idea into action requires a plan.

2. “Good ideas, Kara and Carl. Let’s consider the odds of the success of each of your ideas.”
Step 4. Odds of success is Probability theory; a technique used to analyze alternatives.

3. “Now that I understand the problem, let’s use the brainstorming technique to solve it.”
Step 3. Brainstorming is a technique used to generate creative and innovative alternatives.

4. “Tyson, is the machine still jamming, or has it stopped?”
Step 6. The manager is monitoring/controlling by checking to see if the problem is solved.

5. “I don’t understand what we are trying to accomplish here, Mary.”
Step 2. The objective is not clear.

6. “Eddie, what symptoms have you observed to indicate that a problem even exists?”
Step 1. When defining the problem, you distinguish symptoms from causes of the problem.


Applying the Concept 4-2: Classify the Problem

Classify the problem in each statement according to the structure and condition under which the decision must be made.

A. programmed, certainty
B. programmed, uncertainty
C. programmed, risk
D. nonprogrammed, certainty
E. nonprogrammed, uncertainty
F. nonprogrammed, risk

7. Erica, a small business owner, has had a turnaround in business; it’s now profitable. She wants to keep the excess cash liquid so that she can get it quickly if she needs it. How should she invest it?           
D. Nonprogrammed, certainty. This is a first-time decision. To keep the money liquid, she must go with a savings account, certificate of deposit, or money market type of investment with a set rate of interest.

8. Sam, a purchasing agent, must select new cars for the business. This is the fifth time in five years he has made this decision.
A. Programmed, certainty. This is a recurring decision. With a new car you get a warranty, which makes the investment relatively certain that the car will do the job.

9. Tinna has to decide if she should invest in a new company in a brand-new industry. 
E. Nonprogrammed, uncertainty. This is a first-time decision. With a new business, it is very difficult to determine the chances of success. Nonprogrammed, risk (f) is also a good answer because it is difficult to draw a clear line between risk and uncertainty.

10. Aden, a manager in a department with high turnover, must hire a new employee.
C. Programmed, risk. This is a recurring situation—high turnover. When hiring new employees, there is a chance that the new hires will not work out.

11. When Ron graduates from college, he will buy an existing business rather than work for someone else.
F. Nonprogrammed, risk. This is a significant, nonroutine decision. With an established business, there is financial information that gives a probability of success. However, there is always the chance that the past will not repeat itself.

12. Sean is making a routine decision, but being new, he has no idea what the outcome will be.
B. Programmed, uncertainty. This is not common, but is an example because it does indirectly state programmed and uncertainty in the statement.


Applying the Concept 4-3: Using Groups to Generate Alternatives

Identify the most appropriate group technique for generating alternatives in each situation.

A. brainstorming
B. synectics
C. nominal grouping
D. consensus mapping
E. Delphi technique

13. Management wants to project future trends in the social media industry as part of its long-range planning.
E. Delphi technique. Projecting future trends calls for a forecasting technique.

14. Management at a video game maker wants to develop a new game. It calls in a consultant, who is leading groups of employees and children to come up with ideas together.
B. Synectics. Developing new video game requires generating novel ideas.

15. A department is suffering from morale problems, and the manager doesn’t know why or how to improve morale.
D. Consensus mapping. Using consensus mapping to get group agreement on a solution to their morale problem would be ideal in this situation.

16. A department is getting new computers, and everyone has to get the same type: either desktop, laptop, or tablet. The manager doesn’t know which type to select for her 25 employees. 
C. Nominal grouping. A voting technique would work fine for selecting computers with a large group.

17. A manager wants to expand the business by offering a new product but doesn’t know what to offer, or if it should be a related product or something different.
A. Brainstorming. The group may come up with some creative ideas that might be good innovations.


Applying the Concept 4-4: Selecting Quantitative Methods

Select the appropriate quantitative method to use in each situation.

A. break-even analysis
B. capital budgeting
C. linear programming
D. queuing theory
E. probability theory

18. Lawn care services sole owner/operator Shawn must decide whether to repair his old truck or to replace it with a new one.        
B. Capital budgeting. A truck for Shawn is major capital equipment, and this is a fix or replacement of asset.

19. Kandeeda wants to invest money in commodities futures to make a profit.
E. Probability theory. Investments are usually made under the condition of high risk, especially in commodities. A simply none technique is to assign probability of the investments going up or down, such as 50% or 85%.

20. Henry the Burger King manager wants to even the workload in his fast-food restaurant. At times, employees hang around with no customers to wait on; at other times, they have long waiting lines.
D. Queuing theory. In a fast-food restaurant, when employees are overworked, there are lines of people waiting. When there are no lines, they are idle. Queuing theory would help the restaurant balance these two.

21. Rentals-R-Us manager Maggie wants to know how many times a bounce house will have to be rented out to recoup the expense of adding it to the rental list.
A. Break-even analysis. If the owner pays $1,000 and rents them for $200, it takes five rentals to break even. To make it worthwhile to add a bounce house to the rental list, it would take more than five rentals to make a profit.

22. The machine shop manager Chris is scheduling which products to make on which machines next week.
C. Linear programming. The manager is trying to maximize the use of limited resources.